Investors looking for something more when it comes to environmental, social, and governance (ESG) and sustainable investing via ETFs are in luck because the space is evolving. One idea that has long been evolved relative to legacy peers is the Global X Conscious Companies ETF (NasdaqGM: KRMA).
KRMA, which turns four years old in July, tries to reflect the performance of the Concinnity Conscious Companies Index, which tracks companies that achieve financial performance in a sustainable and responsible manner and exhibit positive Environmental, Social and Corporate Governance (ESG) characteristics.
“ETFs are becoming fertile territory for deployment of ESG as highlighted by proliferating funds and assets being allocated to those products,” according to Nasdaq. “As the universe expands, so do the chances that investors will have questions or be downright confused about what sustainable investing encompasses.”
The current trend towards more environmental, social and governance (ESG) investing suggests that it’s here to stay. In the case of ETFs, more and more investors are seeking funds out that match up with their ESG initiatives. At its core, KRMA takes investors beyond the traditional ESG exclusions (guns, tobacco and gambling) and that can benefit long-term results.
Making Another KRMA Call
“Proving that it’s cut of a different ESG cloth, KRMA employs a methodology that focuses on customers and suppliers, bond and equity investors, communities and workers. Looked at another way, KRMA adheres to an accounting principle known as the triple bottom line (3BL), which blends sustainability and profitability metrics,” notes Nasdaq.
KRMA is far from the typical ESG ETF that excludes sin stocks, gun manufacturers and gambling companies, among others. Rather, KRMA’s methodology focuses on stakeholders, such as: Customers, Suppliers, Stock & Debt Holders, Local Communities, and notably, Employees, according to Global X.
Central to KRMA’s benefits to investors is what type of companies are left out of the fund. Think of it as addition by subtraction or exclusion.
“Often, short-termism manifests as cost-cutting designed to boost earnings rather than build long-term value. Good governance rejects this idea. Instead, it focuses on being a good steward of shareholder capital by making decisions oriented toward the long term, also known as long-termism,” according to Global X.
While past performance isn’t a guarantee of future returns, KRMA has outperformed the S&P 500 since inception with less volatility. Those are favorable long-termism traits right there.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.